TR Corporate Presentation - 11 May 2015 - Grupo Tubos … Corporate Presentation - … · May 2015...

May 2015

Special Products & Integral Services Worldwide

Tubos Reunidos

GROUP

TUBOSREUNIDOS

May 2015REUNIDOSTUBOSGROUP

Tubos Reunidos Group

1. Company Overview

2. Strategy

3. TR – MISI – JFE: Strategic Agreement

4. Financials

Content

2

1.Company Overview

REUNIDOSTUBOSGROUP

May 2015REUNIDOSTUBOSGROUPTubos Reunidos Group

• Seamless Steel tubes Company

• Global International Footprint : 86% of Sales (2014)

• Oriented to the Energy Sector: 83% of Sales (2014)

• Focus on Special Products: 65% of Sales (2014)

• Transformational Investment Plan Under Execution: 150 Mill Eur 2012-2016 (65% completed)

• Strategy: Specialization + Service + Competitiveness. Current Strategic Plan 2014-2017: Towards a new Tubos Reunidos

• Agreement with Marubeni-Itochu TubularsEurope Plc. and JFE Steel Corporation announced in November 27

4


5,0

1,02,50,40,5

32,0

Tubos Reunidos Market

Standard

tubes &

pipes

Powergeneration,petrochemicals

Specialtubes & pipes:

5

• OCTG: Premium

• Pressure Pipes: Special Grades

• Line Pipes: Special Grades

• Large OD Stainless Steel Tubes

• Large-diameter Pipes: Special Grades

TR: - Focused on high end segments for the energy se ctor- Brand name and differentiation

TR: - Focused on high end segments for the energy se ctor- Brand name and differentiation

Oil & Gas

Applications

Global Demand for TR´smarket segments9 million MT

12 million MT

Global Demand forSeamless Steel Pipes44 million MT

May 2015REUNIDOSTUBOSGROUPSector Trends

New and more efficient technologies – Growing need for specialty tubing6

TR: - Exposed to markets with high growth prospects- Opportunity for sales increase and margin expansio n

TR: - Exposed to markets with high growth prospects- Opportunity for sales increase and margin expansio n

Commodity Products

Special Products

Seamless Steel Tubes Market

Oil & Gas - Non-conventional oil & gas exploration technology

• Directional drilling, off-shore,shale–gas, deeper drilling

Power generation & Petrochemicals – Cutting-edge technologies• Stringent safety requirements• Maximum efficiency• Power > 600 MW

High performance. tubes and pipes:

• High corrosion• Extreme temperatures • Strong pressure• More reliable• Higher efficiency• Lower maintenance

Fossil fuel power plants (2012-2020, GWhinstalled)

Petrochemicals(2011-2018, MT)

+8%

Source: US EIA, : The Metal Bulletin Research. The Five Year

Outlook for the Global OCTG Industry, 2013, Broker Share

Premium OCTGtubes (2012-2018, MT)

NuclearPlants (2012-2020, GWhinstalled)

+6%

+4%

CAGR

+4%


Focused on Special and Niche Products

7

Tubes and pipes up to 25" OD and > 40 mm WT in special types of steel

Large diameter TubesLarge diameter Tubes Stainless steelStainless steel

Pressure Pipes, Boilers and Heaters

Pressure Pipes, Boilers and Heaters

OCTG PremiumOCTG Premium Special service line PipesSpecial service line Pipes

Tubes of > 8" OD in stainless steel up to 25” OD

High chrome alloys

Special lengths (up to 27 meters)

Rifle tube

Quenching and temperingHigh collapseHigh chrome alloysProprietary steel gradesPremium threads JV withMISI - 2016

Quenching and tempering

Sour service

Special grades

Offshore

Critical phases and cutting-edge technological processes

Critical phases and cutting-edge technological processes

Exploration in extreme corrosion,

pressure and temperature conditions

Exploration in extreme corrosion,

pressure and temperature conditions

Offshore and special grades

linepipes

Offshore and special grades

linepipes

TR: - Wide portfolio of special products - Based in own know how and R+D capabilities

TR: - Wide portfolio of special products - Based in own know how and R+D capabilities

Oil & Gas Power Generation and Petroquemicals


Diversified Focused onSpecial and Niche Products

16%

19%

28,5%

12,1%

24,7%

34,7%

Boilers, Heaters, Pressure pipe, linepipeSpecial OCTG

Stainless steel and Special large ODStandard

40,8%

29,0%

12,9%

17,3%

Oil and gas

Power generation

Petrochemicals

Industry andothers

Energy Sector: 83% of sales (2014)

Energy Sector: 83% of sales (2014)

Special Products: 65% of sales (2014)Special Products:

65% of sales (2014)

Sales breakdown by client, Seamless Steel Tubes and Pipes, Millions of Eur, FY 2014

Sales breakdown by product, Seamless Steel Tubes and Pipes, Millions of Eur, FY 2014

8

TR: - Diversified by products and market segments wi th acommon commercial strength: quality and service

TR: - Diversified by products and market segments wi th acommon commercial strength: quality and service


Manufacturing of a Wide Portfolio of Pipes

• 325,000 MT production capacity

• Small and large size outside diameter tubes

• Carbon, alloyed, high alloyed: 1/2”-25” (12mm – 635 mm)

• Stainless steel tubes: 8”-25” (190 mm – 635 mm)

• Production sites located in the Basque Country (Northern Spain)

• Production process vertically integrated

Large diameter Tubes: up to 25”

Manufactured at

Productos Tubulares

• Diameter: 26.7 – 180 mm. (6-120mm upon cold-

drawn).

• Thickness: 2.6 – 20 mm.

• Carbon, alloyed and high alloy.

• Diameter: 190-635 mm.

• Thickness: 6.30 – 120 mm.

• Carbon, high alloy and stainless.

9

TR: - Vertically integrated from scrap to finished p ipes- Flexible and efficient production processes

TR: - Vertically integrated from scrap to finished p ipes- Flexible and efficient production processes

Small and mid-size diameter tubes: up to 7”

Manufactured at

Tubos Reunidos Industrial


Worldwide Presence

• Historic worldwide presence

• 86% of sales in international markets

• 58% of sales out of Europe

Sales Breakdown by Region,Seamless Steel Tubes and Pipes, Millions of Eur, FY 2014

42%

32%

10%

13%3%

Total Europe

North America

Far East

Middle East

Other

10

TR: - Balanced geographic diversification- Presence in major markets for energy applications

TR: - Balanced geographic diversification- Presence in major markets for energy applications

September 2014

REUNIDOSTUBOSGROUPShareholder structure

14,9%

10,2%

9,0%

6,6%

6,4%3,8%

49,1%

BBVA

Zorrilla Lequerica Family

N+1 por QMC II Iberian Capital Fund (N+1Asset Management)Ybarra Family

Barandiaran Family

De Miguel Nart

Free Float

11

2.Strategy

REUNIDOSTUBOSGROUP


From generalist manufacturers to…

Specialist in Premium and niche products

Towards a New Tubos Reunidos

Strategic Cornestones

Premium1

2

3

4

Service

Competitive

Global

From flexibility and versatility to…

From cost-efficient to…

From geographically diversified to…

Integrated Service Solutions

Structurally competitive

Global and local presence

13

TR: - Capturing growth opportunities to be a larger companyoffering Special Products & Integral Services World wide

TR: - Capturing growth opportunities to be a larger companyoffering Special Products & Integral Services World wide

May 2015REUNIDOSTUBOSGROUPSales volume increase

14

2013 2014 2017Mechanical and others LinepipeOCTG Pressure PipesLarge OD & Stainless

MTs, Thousands+ Volume + OCTG

• High demand from non-conventional technologies• TR´s new high-added value products – investment

program• TR´s historic presence in the US – large growing market • Agreement with MITE – JFE: Stronger capabilities and

geographic reach

+ Pressure Pipes – Power Gen & Petrochemicals• Emerging countries development• Global replacement towards clean technologies• TR´s new high value added products

+ Large OD and Stainless• Strong competitive advantages and entry barriers for TR• Niche product - TR Group large market share• New special products since 2013

+ Service, + Competitiveness, + Global presence

TR: - Available capacity without capex requirements- Main investments for new products already executed

TR: - Available capacity without capex requirements- Main investments for new products already executed


Sales and technology strategy focusedon higher added-value products: inhigh-growth, high-return segments

Product Mix Improvement

15

2013 2014 2017

64% 65%78%

+ Better mixEur Millions

• Heat treated tubes and pipes

• High alloy steels

• Cleaner steels

• OCTG products with Premium threads

• Special large OD tubes and pipes

• Larger portfolio of Stainless Steel tubes

TR: - Most new high value added products alreadydeveloped and industrialized

TR: - Most new high value added products alreadydeveloped and industrialized


Integrated Service Solutions

16

Pressure

Pipes

Pressure

Pipes

LinepipeLinepipe

Stainlessand LargeOD pipes

Stainlessand LargeOD pipes

OCTGOCTG

Local

Presence: short deliveries

Product

Premium

threads

Oil field

service

Flexibility

in project

orders

Complete

range of

products

Finishing

services (coating,

painting, …)

Complete

range of

Products

and accesories

Project

execution

management

Tailor

made

products

Technical

support

Local

service: stock ,

logistics

TR: - Moving up the value chain to be closer to clie nts- First steps taken: Almesa, MISI JV, Commercial agr eements

TR: - Moving up the value chain to be closer to clie nts- First steps taken: Almesa, MISI JV, Commercial agr eements

+ Service: Integrated Solutions

May 2015REUNIDOSTUBOSGROUPStructurally Competitive

17

From efficient, with

a management

model based on cost

streamlining…

To structurally competitive

• Innovation in more competitive processes:

- In house steel production- Elimination of bottlenecks

• Operational excellence

• Offshoring of parts of the productive process and selected acquisitions to drive competitiveness gains

TR: - Room for efficiency and productivity gains get tinginsight from the new production processes

TR: - Room for efficiency and productivity gains get tinginsight from the new production processes


+ +Asia and Latam

-

Percentage of revenue in € in 2013, 2014 and objective for 2017

USA& Canada• High investments in oil & gas 2012-2035• Shale gas revolution• TR boasts entrenched positioning, with

new products and capabilities• TR increasing local presence

More Global

• Emerging countries development• Positioning in high value-added

segments• TR agreement with MISI and JFE. • New Almesa (Service unit) strategy of

growth in Africa, Asia and Latinoamerica

• Opportunities in México: energyreform.

• New delegations oppened in Dubai, Malasya and Mexico

18

25%-> 26% -> 30%

Europe• Consumption recovering from lows of

2012-2013 (-44% vs. 2007) althoughlower growth than in other geographies

• Entrenched leadership with new products

30% -> 32% -> 35%

45%-> 42% -> 35%

TR: - Expanding commercial capabilities: new delegat ions- Developing new channels

TR: - Expanding commercial capabilities: new delegat ions- Developing new channels


• TR announced an agreement on November 27 2014 with Marubeni-Itochu Tubulars Europe Plc (MITE), the UK subsidiary of Marubeni-Itochu Steel Inc. for the purpose of manufacture, market and supply OCTG products, with JFE Premium connections, for oil and gas drilling worldwide. This agreement allows TR:

Corporate Development

• Strengthen commercial reach and guarantee route-to-

market for its new Premium OCTG products

• Increase exposure to emerging markets

• Move up in the value chain towards Service Solutions to

clients including own finishing capabilities, Premium

connections and Oil&Gas field service centers

19

Manufacturing of Premium tubes

Global integrated distribution solutions

Premium connectionsWith limited capex and coststructure requirements

TR: - Corporate transactions aligned with the strate gy- Capital allocation driven by return on capital max imization

TR: - Corporate transactions aligned with the strate gy- Capital allocation driven by return on capital max imization

Commercial Agreements + JV Alliances + Corporate Transa ctions: leveraging on TR´s competitive advantages including brand name and technical capabilities. MISI JV for Premium OCTG as first step in TR´s corporate development strategy


‣

2.4xRevenue growth +margin expansion

1.7x‣ Growth in all segments:

seamless tubes, distribution and automotive

Consolidated EBITDA,€ million

Consolidated revenue,€ million

Quantitative ObjectivesStrategic Plan 2014-2017

350 408598

2013 2014 2015 2016 2017

42 41

101

2013 2014 2015 2016 2017

2013 - 2017

Consolidatedrevenue, € million

ConsolidatedEBITDA, € million

20


Consolidated Capex,€ million

Leverage

€108.5mn

Quantitative Objectives2014-2017

ConsolidatedCapex, € million

Leverage

Cash flow generation expected to drive significant reduction in leverage without having to jeopardize the capex prog ramme or

dividend policy

Cash flow generation expected to drive significant reduction in leverage without having to jeopardize the capex prog ramme or

dividend policy

0

10

20

30

40

50

2012 2013 2014 2015 2016 2017

Transforming Investment Plan 2012-2016: €150mn

0

50

100

150

200

2014 2017

4,1x

€172mn

1,2x

21

TUBOSREUNIDOSGROUP

3.TR – MISI – JFE: Strategic Agreement


TR – MISI – JFE: Complementary Strategies

• Created in October 2001

• Divisional merger by spinning off the steel business divisions of two major general trading companies

• 9.500 employees approx.• Sales: EUR 13,800 Mn . approx.• Pipes distribution Capacity : almost 3

Mn., specialized in OCTG and line pipe

• Result of the merger of NKK and Kawasaki Steel in 2003

• One of the world’s leading integrated steel producers (31 Mn. MT/Year)

• 42.481 employees• Sales: EUR 27,300 Mn. approx.• Pipes production capacity: 1.5 Mn Tons

approx. (350.000 Tons seamless)• Focused on stainless and high alloy• Own Premium Connections: 5th worldwide

leader• Global Technical & Services Network

Premium Connections

Manufacturing Tubes: 320.000 Tons capacity

Worldwide Distribution capacity:Strategic Agreements with suppliers

Manufacture, market and supply of Premium OCTG wor ldwideManufacture, market and supply of Premium OCTG wor ldwide

Agreement,

Nov. 2014

23


OCTG Threading Capacity

24

� OCTG threading Joint Venture: New plant in Alava –Spain

51% 49% Premium Threads

License agreement

Investment in a new threading plantInvestment in a new threading plant

MITE: Marubeni Itochu Tubulars Europe Plc

� 1Q 2016: Start of production


25

Subillabide – Alava

� New Plant for threading

� Logistically located for global geographical reach

� 30 Million Euros Investment and 80 employees in the first phase of the project

PORT OF BILBAO

TUBOS REUNIDOS INDUSTRIAL

NEW PLANT - TUBOS REUNIDOS THREADS

OCTG Threading Capacity


OCTG: TR – MITE JV

26

OCTG Premium Integrated Solutions to Final Clients

Building an alternative and differentiated offerBuilding an alternative and differentiated offer

Premium pipes

manufacturing &

supply

Premium

Connections

threading

Commercialization :

Global One Stop

Shop Offer

Service

� JFE Premium

thread license &

technology

� TR – MISI Joint

Venture: technical

& market

knowledge

� TR: 120 years

manufacturing pipes.

New investments &

I+D+i

� MISI market

knowledge on most

demanded products

� MISI + TR + JFE

commercial

networks & brand

name

� MISI complete range

of products for

OCTG

� MISI + TR + JFE

quality

� MISI + JFE: Field

service centers, JFE

licensees network


TR – MISI – JFE agreement announced on November 27 2014, was contemplated among the actions envisaged in TR´s Strategic Plan 2014-2017

The impact of the agreement in CAPEX, sales, margins and results of TR are therefore included in the financial projections and objectives of the plan

The transaction supports strategic plan giving higher visibility to its successful execution

Corporate Strategy: TR – MSI – JFE

Strategic Plan Objectives

• Product Mix Improvement• Sales Volume Increase based in

new products & competitiveness• Service• Geographic growth and

diversification

TR – MISI – JFE alliance

� Focused on Premium OCTG Products

� Partners commercial reach, technical and market knowledge

� Partners ´ Service centers worldwide

� Higher capabilities to access to new geographic markets 27


Reinforcing OCTG capabilities and market reach

TR – MISI – JFE: Stronger capabilities in OCTG TR – MISI – JFE: Stronger capabilities in OCTG

Strategic Plan - OCTG TR – MISI - JFE

� Obtain own threading capabilities

� Premium Connections for TR ´s pipes

� Stronger capabilities to our current markets

� Access to new geographic markets outside of USA

� Knowledge and technical support for further develop new products

• Increase OCTG sales

• Mix improvement

• Threading capabilities

• Geographic diversification

28

4.Financials


30

Consolidated figures:2014 (Eur Million)

Core business accounted for 88% of consolidated sales and 89% of consolidated EBITDA

Increase in consolidated sales supported bythe widest high value added range of productsoffered by the Group following investmentsmade in 2012-2014

350 408

Sales

311 358 39

50

2013 2014

Seamless Steel Tubes Automotive business + others

39 37 3 4

2013 2014

12,1%-2,0%

42 41 6,6 7,1

Net Profit

7,3 6,7 -0,7

0,4

2013 2014

+16,4% 10,1%

EBITDA / sales

+6,6%

Margin impacted by:• Competitive environment• Learning curve of new production processes

and product mix


31

Commissioning and development of new own production processes

Industrialization of the new high valued added portfolio of products

Adaptation to own manufacturing of high value added steels, dimensional ranges and products

New facilities for special finishing treatments

Main Figures 2014 (Eur Millions)

2012 2013 2014

TotalInvestments 41 42 27

Seamless Steel Tubes 35 39 23

Depreciation 27 25 26

✓65% of total investment plan 2012-2016 of 150 Eur millions already executed NFD 2013 NFD 2014

33 (27)4

182 172

WC variation+ others

CAPEXNet profit + depreciation

Reduction of net financial debt by 10 Eurmillion

Working Capital improvements


Consolidated Group Financials, 2014 (Eur Millions)

32

INCOME STATEMENT, Thousands of Euros Q4 2014 Q4 2013Q4 2014 /

Q4 2013FY 2014 FY 2013

2014 /

2013

Revenue 108.064 87.585 23% 407.952 350.451 16%

Changes in inventory 14.559 10.711 18.993 1.963

Supplies (66.512) (47.802) (217.285) (161.781)

Personnel expenditure (25.750) (25.586) (101.296) (95.952)

Other operating expenses (27.236) (21.533) (86.254) (77.819)

Other operating income and net gains/(losses) 7.162 9.546 19.263 25.375

EBITDA 10.287 12.921 (20%) 41.373 42.237 (2%)

Depreciation and amortisation charge (6.543) (5.851) (26.361) (24.686)

EBIT 3.744 7.070 (47%) 15.012 17.551 (14%)

Financial income/(expense) (2.674) (4.333) (8.827) (11.429)

Profit before income tax 1.070 2.737 (61%) 6.185 6.122 1%

Profits tax 1.125 (456) 1.266 49

Consolidated profit for the period 2.195 2.281 (4%) 7.451 6.171 21%

Profit from minority interests (195) (64) (372) 472

Profit for the period 2.000 2.217 (10%) 7.079 6.643 7%


Consolidated Group Financials, (Eur Million)

33

BALANCE SHEET, Thousands of Euros Q4 2014 Q4 2013

NON-CURRENT ASSETS 417.639 411.801

Inventories and customers 215.481 191.258

Cash and other cash equivalents 24.464 25.798

CURRENT ASSETS 239.945 217.056

Assets held for sale 4.599 4.836

TOTAL ASSETS 662.183 633.693

NET EQUITY 260.936 246.037

DEFERRED REVENUES 12.469 10.946

Non-current provisions 3.622 15.183

Bank borrowings and other financial liabilities 155.640 169.054

Other non-current liabilities 51.548 55.656

NON-CURRENT LIABILITIES 210.810 239.893

Short-term provisions 8.249 6.997


Other current liabilities 129.283 91.252

CURRENT LIABILITIES 177.968 136.817

Liabilities held for sale -- -

TOTAL LIABILITIES 662.183 633.693

Net financial debt 171.612 181.831


34

Consolidated figures:1Q 2015 (Eur Million)

Consolidated sales in Q1 remain positive supported by strong backlog at 31st December 2014

Increased sales and sustained activity in the energy-generation and petrochemical segments

Positive effect of stronger USD vs Euro

New orders and margins initially impacted by the effect of falling oil prices with a reduction in oil and gas drilling activities in North America and the consequent reduction in the use of capacity in the Group to adapt to the level of activity in OCTG

Consolidated ('000 EUR) Q1 2015 Q1 2014 % var

Revenue 102.592 98.278 4,4%EBITDA 11.114 12.616 (11,9%)

% sales 10,8% 12,8%

EBIT 3.288 5.251 (37,4%)EBT 2.414 2.586 (6,7%)Net Income 1.703 2.304 (26,1%)


35

Consolidated figures:1Q 2015 (Eur Million)

Sales of seamless tubes supported by the energy generation and petrochemical sectors, going from 31,3% and 19,1% in the first quarter of 2014 to 34,5% and 25,5% respectively in the first quarter of 2015

Europe (44,3% of sales vs. 40,5% in the same period of 2014): 2% sales increase supported by the domestic market

North America (36% of sales vs. 28,6% in the same period of 2014): 18% increase in sales, counting with significant backlog of OCTG and large diameter tubes at December of 2014 as well as positive impact of stronger USD

Middle East (9,6% of sales vs. 11,5% in the same period of 2014): Inventory reductions in the region

Far East (5,1% of sales vs. 18,5% in the same period of 2014): Delays in the award of projects

Sales by Sector, % in millions of EurosSales by Sector, % in millions of EurosSales by geographic market, % in millions of EurosSales by geographic market, % in millions of Euros


36

Estructura Financiera, (Eur Million)

Solid long term financial debt structure: 79,3% of gross borrowing at 1Q 2015 with a maturity date of over twelve months

Strengthening of the financial structure and optimization of the finaning conditions of the Group during 2014 and 1Q 2015

Lines of credit secured but not drawn down stand at 71 million euros

Financial Structure, Gross Debt31/03/2015

3%

22%

75% Commercial paperEuropean Investment BankBanks financing

2015 2016 2017 2018 > 2018

Debt maturity, % over total gross debt

9%

16%22% 21%

32%


Consolidated Group Financials, 1Q 2015, (Eur Million)

37

INCOME STATEMENT, Thousands of

EurosQ1 2015 Q1 2014

Q1 2015 /

Q1 2014

Revenue 102.592 98.278 4%

Changes in inventory 4.822 10.715

Supplies (47.686) (52.065)

Personnel expenditure (29.491) (27.411)

Other operating expenses (21.904) (19.623)

Other operating income and net gains/(losses) 2.781 2.722

EBITDA 11.114 12.616 (12%)

Depreciation and amortisation charge (7.826) (7.365)

EBIT 3.288 5.251 (37%)

Financial income/(expense) (874) (2.665)

Profit before income tax 2.414 2.586 (7%)

Profits tax (393) (192)

Consolidated profit for the period 2.021 2.394 (16%)

Profit from minority interests (318) (90)

Profit for the period 1.703 2.304 (26%)


Consolidated Group Financials, 1Q 2015, (Eur Million)

38

BALANCE SHEET, Thousands of Euros Q1 2015 Q4 2014

NON-CURRENT ASSETS 421.053 417.639

Inventories and customers 219.687 215.481

Cash and other cash equivalents 25.345 24.464

CURRENT ASSETS 245.032 239.945

Assets held for sale 4.347 4.599

TOTAL ASSETS 670.432 662.183

NET EQUITY 263.519 260.936

DEFERRED REVENUES 11.854 12.469

Non-current provisions 4.118 3.622


Other non-current liabilities 61.250 51.548

NON-CURRENT LIABILITIES 225.116 210.810

Short-term provisions 7.356 8.249


Other current liabilities 120.894 129.283

CURRENT LIABILITIES 169.943 177.968

Liabilities held for sale -- --

TOTAL LIABILITIES 670.432 662.183

Net financial debt 176.202 171.612


Consolidated Group Financials

Consolidated RevenueMillions of Euros

Consolidated EBITDA and EBITDA MarginMillions of Euros; % of revenue

39


Consolidated Group Financials

Consolidated RevenueMillions of Euros

Consolidated EBITDA and EBITDA MarginMillions of Euros; % of revenue

40

May 2015

Special Products & Integral Services Worldwide

Tubos Reunidos

GROUP

TUBOSREUNIDOS

TR Corporate Presentation - 11 May 2015 - Grupo Tubos … Corporate Presentation - … · May 2015...

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